By Adam Pincus
The Canadian Imperial Bank of Commerce filed a lawsuit yesterday seeking to foreclose on an $81 million loan it provided in 2015 to an affiliate of AKA, Prodigy Network and Shorewood Real Estate secured by the the AKA United Nations hotel at 234 East 46th Street in Midtown East. This is the second-largest commercial loan foreclosure filing since September 2020, according to a PincusCo analysis of court records.
The bank claims the borrowers stopped making payments in May 2020 — as Covid was sharply limiting travel and hotel stays — and in July the parties struck a forbearance agreement. The borrowers never made any payments, even with the forbearance, the bank claims.
The AKA is long-term hotel. The AKA United Nations is “temporarily closed,” according to the AKA website, even as other AKA locations remain open.
The lender declared the loan in default, according to the complaint, for causes including that the loan was not repaid by its due date, January 11, 2021.
The complaint, like all filings in New York State Supreme Court, represents the position of one side in the dispute and the information may or may not be complete and accurate.
The signatory for the borrower was Shorewood’s president and CEO, S. Lawrence Davis.
The current guarantors according to the complaint are AKA’s Bradley Korman and Lawrence Korman and Shorewood’s S. Lawrence Davis. The other original guarantor, Prodigy founder Rodrigo Nino, died in 2020.
This loan is secured by one of approximately 1,500 buildings that PincusCo Media is tracking that were financed or refinanced at the peak of the market and have not sold or been refinanced since then.
According to city assessment records, the building shows an approximate net operating income of just $1.4 million – resulting in a debt yield of just 1.7 percent, far below the typical 10 percent target. The NOI figures are the latest estimated income and expense figures published by the city last month. The city pegged the pre-tax NOI at $2 million, and estimated its property tax bill at $612,702, resulting in a typically accounted for NOI of $1.4 million.
This is one of the very few commercial foreclosure cases filed over the past several months. There have been 11 commercial pre-foreclosure cases filed in the city for loans greater than $10 million since September 2020.
This is the second-largest pre-foreclosure filed since September. The largest was Bank Leumi filing to foreclose on Fortis Property Group’s $120 million loan at 161 Maiden Lane, as PincusCo first reported.